Latvia in 1997

Head of government: Prime Ministers Andris Skele and, from July 28, Guntars Krasts

Latvia’s coalition government experienced difficulties in 1997. Andris Skele, who resigned as prime minister in January when Pres. Guntis Ulmanis criticized his choice for finance minister, was quickly voted back into office. On February 13 Parliament confirmed Skele’s new five-party coalition by 70 votes to 17. Skele, an entrepreneur with no political affiliation, was widely credited with having turned Latvia’s economy around during his first year in office. He had delivered the country’s first balanced budget and instituted other economic reforms, especially in banking, which improved Latvia’s relationship with the International Monetary Fund and gained a BBB investment grade rating from Standard and Poor’s. The country’s gross domestic product was expected to grow 4% in 1997. In July, however, Skele resigned as prime minister following the collapse of his coalition; several high-ranking government officials faced charges of corruption. Guntars Krasts, a former minister of the economy and supporter of free-market reforms, replaced Skele as prime minister.

Latvia’s bid to join the European Union was not accepted in talks that began in September. In addition to improving its administrative systems, Latvia was told that it had to speed up naturalization of minorities, in particular its large number of Russians.

Latvia received support from a number of Western countries in its quest to become a member of NATO, but all three Baltic states were turned down. Russia remained fiercely opposed to their joining the Western alliance and offered its own security guarantees. Though these were rejected, Prime Minister Krasts declared that more economic cooperation with Russia would be welcome.

Efforts to privatize the economy continued. For sale were the Latvian Shipping Company and the big utility companies, Latvenergo and Latvia Gas. Russian gas supplier RAO Gazprom and two German companies bought a one-third share in the gas company, the largest privatization to date.